Most observers expect Narendra Modi’s BJP to win the Gujarat elections when votes are counted on 18 December. Photo: AP

New Delhi: A cakewalk state election has turned into a closer than expected race for India’s prime minister as a landmark tax reform and his disruptive cash ban last year stoke economic discontent in his home state.

Although Narendra Modi’s ruling Bharatiya Janata Party (BJP) is still expected to win the upcoming election in Gujarat, his lead in the polls has shrunk amid grumbling about the economy and the prime minister is campaigning hard as the vote approaches. It’s being treated as a bellwether for Modi’s chance of national re-election in 2019, with significant implications for the $2.3 trillion national economy.

Long considered a favourite, Modi has seen his lead in a widely-watched poll dissipate as the election nears. Despite the fact the BJP has governed the state for 19 years, with Modi its chief minister for about 12 years, his party is headed for a close finish with the opposition Congress party, according a polling firm.

People are angry with the poorly implemented nationwide goods and services tax as well as economic fallout from Modi’s decision last year to demonetize 86% of India’s currency, said Sanjay Kumar, a director at the Centre for the Study of Developing Societies.

“There is an acute dissatisfaction with the BJP,” Kumar said. However, “Modi’s personal popularity is still helping the BJP to hold onto this election.”

Graphic: Bloomberg

During Modi’s time as chief minister, Gujarat’s economy grew faster than the rest of India, and its per capita income almost quadrupled. The “Gujarat model” became a byword for Modi’s pro-business policies — and a promise of what he might do for India. That’s not the case today.

“Farmers are not getting good prices, youth are not getting employment and the fruits of development have reached very few people in Gujarat,” said Sagar Rabari, a farmer activist in Ahmedabad, Gujarat’s biggest city. “People are realizing the so-called ’Gujarat model’ of development was only for a few industrialists and not for the masses.”

Narrowed lead

Most observers expect Modi to win the Gujarat election when votes are counted on 18 December. But the narrowed lead is surprising for a bastion of BJP support such as Gujarat, as well as for Modi, whose party has swept to power in most state elections since he took national office in 2014.

Anything other than a comfortable victory for Modi would surprise investors betting on a clear win in Gujarat, as well as five more years of Modi’s government on the other side of 2019. “Market assumptions so far have been of a comfortable BJP victory in Gujarat, and that the momentum continues till 2019,” wrote Mumbai-based Credit Suisse analysts Neelkanth Mishra and Prateek Singh in a 5 December note.

In November, 43% polled said they would vote for the BJP, with the same percentage saying they would vote for the main opposition Congress party, according to a CSDS-Lokniti poll of 3,655 voters. Two months earlier, 59% said they would vote for the BJP, compared to 29% for the Congress.

However, seat projections still put the BJP ahead with between 91 and 99 seats, compared to between 70 and 86 for the Congress party. This is below the BJP’s stated goal of winning 150 seats, up from the 115 seats they won in 2012. Kumar said winning 150 seats was “day dreaming,” because the BJP have struggled with incumbency at a time of economic uncertainty. There’s also been protests from farmers and an influential local caste leader, he added.

“Economic issues are dominating in this campaign, while the BJP is avoiding these issues — trying to say the GST is not an issue, demonetisation is not issue,” Kumar said. “If they lose Gujarat, this would change the course of Indian politics for the next few years and alarm bells would ring for the BJP for 2019.” Bloomberg